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Shares of Monsanto (NYS: MON) hit a 52-week high yesterday. Let's look at how it got here and see whether clear skies are ahead.

How it got hereThe drought blanketing much of the U.S. will have a negative impact on consumers at the grocery store, but it's been great for those supplying farmers. Monsanto is hitting new highs even after reporting a somewhat disappointing quarter because it expects continued growth going forward. Deere (NYS: DE) is in the same boat as well, and for years to come, farmers will be looking to squeeze yield from varying weather conditions.

A few weeks ago, I argued that companies making farmland more productive are in a strong long-term position. Monsanto and Deere are front and center of this revolution and that's why they're near 52-week highs. They've also outperformed once-hot fertilizer companies like PotashCorp (NYS: POT) and Mosaic (NYS: MOS) , which won't be able to maintain high margins because there are fewer barriers to increased supply in the fertilizer market.

The challenge going forward is that all of these stocks are trading at relatively high multiples. Monsanto, in particular, is very expensive. Management may expect mid-teens earnings-per-share growth next year, but the market has already priced it in.

Price/Book

Quarterly Revenue Growth

Return on Assets

Forward P/E

Monsanto

4.1

-6.1%

9.8%

17.9

Potash

4.1

3.6%

13.4%

11.2

Mosaic Co.

1.8

-18.8%

9.4%

n/a

Deere & Co.

4.3

14.6%

5.8%

9.8

Source: Yahoo! Finance.

On a valuation basis, it looks as if Deere provides more upside than a firm like Monsanto.

What's next?I don't doubt that Monsanto's long-term position is strong, but there are a few things that worry me. First, I think the valuation is too high to get excited about right now. Second, the company has yet to hear from the Supreme Court whether its suit against a farmer over its patented seeds will hold up. This verdict is a big deal, and a negative decision could be disastrous for investors.

The CAPS community is more bullish than I am, giving the stock four-stars (out of five), and over the very long term I think the stock can outperform. But I'd like to buy in at a better price after the Supreme Court ruling to reduce my risk. Monsanto may follow the market higher in the next year, but I don't think it has significant upside given the current valuation.